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Enjoy the fiscal cliff debate? Just wait for the debt ceiling

The debt limit fight will revolve around issues left unresolved in the cliff deal. | Jay Westcott/POLITICO

The idea was modeled in part after the 2011 mechanism devised by Senate Minority Leader Mitch McConnell (R-Ky.), in which lawmakers were given only the ability to disapprove of three separate debt ceiling hikes. None of those efforts succeeded, and the $2.1 trillion debt ceiling increase occurred as scheduled.

Geithner’s more sweeping proposal, made as part of Obama’s initial fiscal cliff offer to House Speaker John Boehner, was widely panned by Republicans who are in no mood to give up their leverage with administration.

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Treasury hit the debt ceiling Monday and Geithner began employing “extraordinary measures” — like postponing payments to government pension funds and suspending a securities program popular with cities and municipalities — to ward off default for about two months.

Democrats have complained that Republicans’ decision to draw a harder line over the debt limit last year went beyond the usual Washington power play and irresponsibly called into question the once unquestionable: whether the U.S. would pay its debts.

Even if Congress steers clear of default, another round of debt-ceiling brinkmanship could do further damage to the U.S. credit rating, analysts said.

“It's hard to predict when the global investing community might lose confidence in the United States but courting that possibility doesn't make sense,” said Rob Nichols, president of the Financial Services Forum, a group that represents the CEOs of large banks and other financial services companies.

Deficit hawks have long claimed that the nation’s deep debt, accompanied with negative reviews from credit agencies, could cause investors to demand higher interest rates from federal borrowers and driving the country further into the red.

Thus far, those fears have not panned out — U.S. borrowing costs have plunged since the S&P downgrade — but market watchers worry that another blow to the credit rating could tip the balance.

“If a second rating agency downgraded the U.S., there would be a real and dramatic effect,” said Brian Kessler, an economist at Moody’s Analytics. “Even if they kick the can down the road again and come up with a three-month raise for the ceiling, it’s still pushing the debate forward, and it shows the credit rating firms that there is an unwillingness to address this issue.”

Kelsey Snell and Jon Prior contributed to this report.

This article first appeared on POLITICO Pro at 2:18 a.m. on January 1, 2013.

Believe that letting the payroll tax holiday expire is the right thing to do - it should have never been granted in the first place given that it feeds the Social Security system and we all know as Americans - whether Democrats, Republicans, Independents, etc., - that the system is broken and needs all the money it can get. So, it is the most FAIR way in Obama's own words (everyone must bear a little pain) to help fix the system that all of us what to draw on in later years.

Believe that letting the payroll tax holiday expire is the right thing to do - it should have never been granted in the first place given that it feeds the Social Security system and we all know as Americans - whether Democrats, Republicans, Independents, etc., - that the system is broken and needs all the money it can get. So, it is the most FAIR way in Obama's own words (everyone must bear a little pain) to help fix the system that all of us what to draw on in later years.

I have no doubt, despite seeing the damage it did last time including the historic loss of the U.S. credit rating, Republicans will once again try to hold the nation hostage with the debt limit. It's the equivalent of buying things with your credit card and then refusing to pay the credit card bill. The difference is that Congress already voted in the appropriation bills to exceed whatever imaginary credit limit it previously set for itself but now wants to pretend that credit limit prevents it from paying the bill.

But I don't think Republicans have as good of a hostage as they think thanks to the 14th amendment. President Obama should simply declare the debt limit to be unconstitutional and order the Treasury to continue to paying the bills. And then let Republicans sue the administration and let the Supreme Court sort it out.

This has always been where the real discussion should have been - too much time was wasted on the tax the rich talks which has little to do with helping the financial situation.

Biden did a good a job - because he has a good relationship with McConnell this could be done. That is the part that Obama has never understood - when you have trust between two people it is easier to get a deal.

we all know as Americans - whether Democrats, Republicans, Independents, etc., - that the system is broken and needs all the money it can get.

I think it's only people who watch Fox News or listen to Rush Limbaugh "know" that. The rest of us know that social security is fully funded for another 25 years and after that can still pay 75% of promised benefits after that. We also know that there is an easy fix to social security: lift the cap on income subject to social security tax. We also know that social security continued to be fully funded during the payroll tax holiday via the general fund.

Believe that letting the payroll tax holiday expire is the right thing to do -

I agree - it wasn't helping the Social Security situation.

With the unemployment I think it would have been better to have a phase out plan. 99 weeks unemployment does not make sense but you can't just abruptly cut it off. They need to have it known what the real cut off date will be so people can make alternative arrangements. Many people will not be able to get the jobs at the pays they were given or have to find alternate careers.

Many people will not be able to get the jobs at the pays they were given or have to find alternate careers.

Or if wtih 3 unemployed people for every 1 job opening, no job at all. But let's blame the lazy people for not taking those imaginary jobs. They can always live in their cars and, if not, there is plenty of room on the sidewalks (urban homeless) or woods (rural homeless).

Why does anyone think the GOP will be more successful talking up entitlement cuts in two months. Do they really believe they can win a debate by holding hostage America's credit rating and the health of global financial markets. The GOP is two dumb to undertand that they have lost the messaging fight in their demand to cut entitlements. They lost seats because of their kamikaze routine in 2011 and helped Obama get reelected. They lost this cliff fight and every poll indicates that no one wants big cuts to entitlements and a shutdown of our government. I would love to see the GOP argue that unless we cut grannies checks they will blow up our credit rating and our 401ks, don't they realize or care how toxic these fights are for their own brand and their own chances in 2014?

I doubted this deal at first but Obama got more revenue and didn't give anything in cuts. And if the GOP wants to default on our debt and crash the markets in too months Obama will beat them senseless with the bully pulpit like he has been doing since the end of the last presidential race. They just don't get it the American people don't agree with the idea of cutting grannies check as a sacrifice to their self created deficit monster myth. The people have voted between spending cuts to popular programs and tax hikes for the rich they will take tax hikes for the rich please. But the GOP wants to committ suicide by continually casting themselves as America's monty burns and making sure that caricature sticks. I love this cliff fight, the GOP looks they went 12 rounds with a tag team of Obama aka Cassius and JOe Biden. If they want to go 15 rounds they are the ones who are going to get messed up and messed up bad. The polls indicate that the GOP policies are unpopular why they want to continue to fight for unpopular positions is up to them, I say that we keep having this fight till the 2014 election that would be wonderful for democratic election hopes.

Why does anyone think the GOP will be more successful talking up entitlement cuts in two months

First thing they have to do is specify the entitement cuts they want to make. Which, if that is the right approach to solving our long-term debt, they should have no problem defending those cuts to the American people. So far Republicans have only been willing to fear-monger about things like the Payment Advisory Board in ACA that might actually help slow the rising cost of health care as the nation continues to gray.

I love it Obama even got to do a touchdown dance and the Senate Republicans realizing that this fight was bleeding them dry of what little polical capital they had in this country. Even after Obama made did a touch down dance they still had to kiss the pinky ring and say yes sir may I have another. You got no cuts and we got some revenues, plus if you think by defaulting and shutting down the government in two months is going to improve Republican electoral chances or help the country well then the GOP is actually more idiotic and inept than even I assumed. It is like watching your worst enemy run at full speed over the literal cliff and demand that you stop them, well all Obama has to do is not run after them in two months and let them cut their own throats. I mean he practically nut checked them publically and said you will raise the debt limit in two months or pay the price of your ineptitude. The GOPs position in two months is even worse than it is now.

Truth teller I disagree the stakes are much bigger in two months. And Obama can argue I gave them a trillion of cuts last year and won the election it is incumbent on congress to raise the debt limit or default. Do you think that Congress choosing to default because of GOP psychosis and every American watching as they set fire to our 401ks and credit rating will help the GOP longterm? I don't, they will get crushed and they know it, that is why Obama was taunting them. He told them publically I'll give you nothing on entitlements without new revenue, if you want to continue to have a losing fight that is wonderful for democrats and bad for your party. We alreadly won the messaging fight and the GOP wants to keeping squandering what little capital they have and exposing themselves as fiscal jihadist nutters, I say that we keep kicking the can down the road till the 2014 election. By the way I would take some short term pain in order to speed the complete political destruction of this long serving cancer of the neoconfederate party. If the GOP wants to shoot themselves in the head I am more than happy to see Obama take the .22 calibre out of their hand right now and hand them a .44 magnum in 2 months.

Or if wtih 3 unemployed people for every 1 job opening, no job at all. But let's blame the lazy people for not taking those imaginary jobs. They can always live in their cars and, if not, there is plenty of room on the sidewalks (urban homeless) or woods (rural homeless).

Sorry you want to work you can get a job - I lost my job had to move and I'm making less money. But I'd rather work. I am not saying that unemployment should be cut off suddenly but it does need to be phased out. People need to know that it is ending so they can make plans.

Biden has to be commended here, Obama and Biden so good cop and bad copped the GOP. Mcconnell and the Senate Republicans to their credit new that Obama had them over a barrel, every single poll on this issue shows that the people agree with the Democratic and disagree with the GOP. If your opponent wants to continue to fight you on losing ground by all means lets dance till the 2014 election. Obama is not up for reelection, but the congress is. Obama won the election and the polls indicate the people are with him on the fiscal issues and don't want to cut grannies check to fight the evil mythical deficit monster who only arises when Republicans are out of power. I quote Dick Cheney, "the genius of REagan was that he proved deficits didn't matter." Biden came in and gave them the last olive branch, the people get that the GOP ideas are both unpopular and don't work. So lets keep doing this folks it has done wonders for the GOP's national brand to watch these teabagger nutjobs hold our financial markets and credit rating hostage.

" fiscal jihadist nutters " , man , you got that right . Reality is about to slap the Grand Old Party and their supporters upside the head , can only deny it and run from it for so long , it's finally caught up with them . I'm looking forward to 2014 , only hope this country can survive them for two more years .

Unfortunately House Republicans have already shown that they put party ahead of country. Business people who donate to the GOP should start letting the Tea Partiers know that they are flirting with political disaster.

Obama willgoup to the the Americannppland just bold face lie to them that the debt ceiling does not matter. Santa Obama is here. Meanwhile your kids and grandkids will not be able to retire till their are in there 80's (if they can find a job without age discrimination kicking them out before then)because big Mama Whomp Whomp cashed in their future for an Obama phone.